Debra, yep that is it in a nutshell. The items have to be something your character could equip and they have to be similar in function. For instance, you could not transmog a hat into a sword, but you can transmog a gun into a crossbow, which by the way, is a great way to get rid of the kapow kapow and still use a gun. Snowowl is using a transmogged bow now in fact.
It will cost you about 100 gold (or at least that is what mine cost). Also, you can't transmog from an item that has already been transmogged. For example, if I want all my weapons to look like my current bow does (it's a bird) then I need to keep the original bow from Kara that I used to transmog the one I am using.
It's a lot of fun if you are after a particular look or if, like me, you can't stand the gun noise but want the damage.